Vol. 686 No. 2
1 Deputy Eamon Gilmore asked the Taoiseach if he has received a response to a letter he sent to the Irish Congress of Trade Unions on 20 May 2009 in which he proposed the use of social welfare funds to pay for a new jobs initiative; and if he will make a statement on the matter. [21498/09]
2 Deputy Enda Kenny asked the Taoiseach his recent proposals to the social partners regarding the use of social welfare funds to support job creation; if he has received a response to his letter in this regard; and if he will make a statement on the matter. [22277/09]
I propose to take Questions Nos. 1 and 2 together.
Arising from discussions with the Irish Congress of Trade Unions and IBEC, the Government has proposed some specific further measures to be taken reflecting the framework agreed with the social partners in January and subsequent consultations. The Government plans to introduce a new scheme to support jobs in addition to the already significant measures introduced to support jobs and competitiveness.
The temporary employment subsidy scheme aims to help the economy retain its productive capacity through the downturn, to help employees retain their jobs and to promote economic and fiscal stability. The scheme will be designed and implemented to minimise the risk of deadweight or displacement while not inhibiting the adjustments which will be necessary to underpin economic recovery at enterprise level. The scheme will involve a subsidy to firms to retain a person in employment for a period which would be limited to 15 months or the end of 2010, with a subsidy of a maximum of €200 per week per employee and a tapered reduction towards the end of the period.
Eligibility for the subsidy will be determined based on certain criteria, including that the firm is a manufacturing or internationally-traded services company, that it is currently engaged in exporting, that a financial assessment establishes that it is now facing significant difficulties as a result of the crisis, that it is viable in the medium term and that it has already taken restructuring measures to improve its competitive position including appropriate measures to address work processes and cost issues. The scheme will operate under the terms of the European Commission's temporary aid scheme for Ireland and implementation will be overseen by a national monitoring committee with representatives from the social partners, as well as relevant Departments and agencies.
The terms of the scheme may be adapted in the light of experience and an allocation of €250 million is being made available at this time. The Government has indicated its intention to have further discussions with the social partners on other measures to maintain employment and help those who lose their jobs. Given that considerable resources are already being spent on this agenda, including social welfare payments to those on part-time working, this new proposal, and our willingness to consider further measures including in the light of experience with this scheme, the Government believes that Congress's ambition for an allocation of €1 billion to the jobs agenda is achievable. The Government has also reaffirmed its objective of ensuring that the rate of home repossessions should remain at its present low levels and we have agreed to establish a mechanism whereby the social partners will be involved in monitoring the situation and advising on any further policy responses which may be required.
The Government's proposals have been published and placed in the Oireachtas Library, and are being considered by the social partners. The ICTU and IBEC are also considering proposals on private sector pay which have emerged from recent discussions between the parties to the transitional agreement under Towards 2016.
I have looked at the document the Government has placed in the Oireachtas Library that sets out the proposals it has made to the social partners and I would like to ask some questions about the proposed temporary employment subsidy scheme. Has agreement been reached with the social partners on the establishment of the scheme? Is the €250 million for the full duration of the scheme, which will last for 15 months, or is it an annual amount? Does the Government intend stepping up to the plate on the proposals made both by ICTU and IBEC for a €1 billion scheme and that the proposal for a €250 million employment scheme will be part of a wider approach?
What is the estimated number of people who will take up the temporary employment scheme? When will it start and when will applications be entertained? To whom will applications be made and by whom will they be made — the employers or individual employees?
This proposal was formally put by the Government in the past week to ICTU and IBEC on foot of progress in discussions that are ongoing. There is agreement in principle and there will be a formal signing off when they come back to us in due course. I expect the steering committee on social partnership to meet in the next few weeks — certainly before the break — and we will then be in a position to proceed with the implementation of the scheme by early September.
The Deputy asked whether the allocation being made was the full amount or an annual amount. This is the initial allocation that is being made based on the national monitoring committee that will sit to assess the scheme. We are prepared to ensure that the scheme works in the best possible way in terms of effectiveness, achieving the broadest possible application and avoiding displacement effects. It will be based on applications by companies for support. There are other initiatives that we also need to consider with regard to short-term working and helping employees individually. There is an ongoing discussion among the Department of Social and Family Affairs, the Department of Enterprise, Trade and Employment and the social partners with the aim of devising a scheme that will be helpful in this regard and that will be available to all, although there are complications in respect of those who work weekends, six-day weeks and so on. It is a technical exercise.
I am conscious of the fact that ICTU, in its submission on the issue of support for economic recovery, gave priority to job retention, jobs initiatives and the building of a scheme with a billion-euro response. It is not about the figure itself, but it is an indication of the priority the Government gives to this area. This is something upon which we are all agreed. As I have indicated, there will not be any problem on our part with regard to its application. The resources used for passive income support under the social welfare scheme will be used for job retention in an active labour market. That makes sense for everybody, including taxpayers. I am anxious to communicate the Government's willingness to continue to provide for the scheme on the basis of its effectiveness and take-up. We will work on that.
If we look at the scheme in terms of how many jobs it will retain, we are talking about tens of thousands — beyond 30,000 — even with an allocation of €200 million or €250 million. However, this is in addition to other labour market responses announced in the supplementary budget, as Deputies know, and we are prepared to consider other measures in an effort to ensure that we maximise effective responses. When we experienced increases in unemployment during past recessions, active labour market policies evolved and were modified based on experience. The inclusion of representatives of the social partners in the national monitoring committee ensures continuous participation by the social partners, including ICTU.
The Deputy asked to whom would one apply to participate in the scheme. It is intended that the scheme will be run by Enterprise Ireland and the county enterprise boards. As to when it will start, I expect the steering committee on social partnership to meet in mid-July and, as Deputies know, ICTU will have its annual conference this coming week. A meeting will take place thereafter in which we can finalise the details and prepare the scheme for its introduction.
As the Taoiseach is aware, the Labour Party has been arguing for some time for labour market measures, particularly ones utilising money that would otherwise be spent on social welfare payments, in an effort to protect and save jobs. We consider this initiative to be a first step in this direction. Whether it is sufficient is another question, but I welcome it as far as it goes.
My questions to the Taoiseach pertain to two other matters referred to in the document and in his reply. The first is training and education. The document refers to the provision of 128,000 places by FÁS and 146,000 in further education. These are impressive figures but I presume in both cases they reflect mainly existing numbers of students and trainees who are already in the system. What do the proposals provide for in terms of additional places in further education and training?
Second, the Taoiseach said that people's difficulties with mortgage repayments and the prospect of home repossessions have been considered as part of the talks with the social partners. I draw his attention to the concern expressed by the Master of the High Court that there will be an "avalanche" of repossession applications in the autumn. There were 207 repossession cases taken in the High Court in the first three months of this years compared with 96 in the same period last year. The Master of the High Court says he is now hearing some 100 cases per week. While it is comforting to know the social partners are talking about repossessions, what comfort can be given to those whose homes are being repossessed and from whom financial institutions are seeking repossessions? Is it intended to offer some type of home guarantee to those who have lost their jobs, whose businesses are in trouble and who are finding it difficult to make mortgage repayments which will ensure they will retain their home at least for a period of time and get through these difficult times? What is the Taoiseach's view of the warning by the Master of the High Court — the person who deals with these matters — that the courts will face an avalanche of repossession applications in the autumn?
In regard to home repossessions, our approach is based on helping people to manage the situation through the supports we already offer and ensuring they come to a sensible understanding with their financial institution on how to proceed. A code of conduct is in existence which we intend to put on a statutory basis in order to ensure there is proper behaviour and an understanding and empathy on the part of financial institutions towards people who through no fault of their own, because of changed circumstances, will require assistance in the short term and possibly means by which they can rearrange their finances over a longer period. There are many arrangements to which financial institutions can come in this respect.
Despite what is claimed in some press coverage, the level of owner-occupied homes being repossessed through the courts remains very low. I am aware of the comment made early last week by the Master of the High Court. While there is absolutely no room for complacency and we intend to monitor developments closely with the social partners, in the context of the hundreds of thousands of mortgages in existence it is important to point out that the level of repossessions in the State compared with other jurisdictions is very low. That reflects better economic circumstances, but it also reflects the implementation of the code of conduct. There is a need to include those financial companies not currently within the remit of the code and to place the code on a statutory basis. That will provide us with the means of ensuring that behaviour one would not regard as reasonable or decent in the circumstances does not become a prevalent response. It is in the interests of both institutions and borrowers to find another course of action that will allow people, over time, to resume repayment of their debts. As I said, we are working to ensure it is done properly and that the process is monitored closely.
In regard to the additional training and education supports that are in place, the document presented to the social partners outlines the many important additional resources that were provided in the supplementary budget. Deputy Gilmore is correct that not all of these training and education places are on an annualised basis, although some are, particularly in the training area. However, it gives an indication of the throughput and activity that is taking place, with 128,000 training places and 164,000 in the broad education area. The opportunity to take up these reskilling or further education opportunities will assist people in the current situation. In addition, the €100 million enterprise stabilisation fund is being drawn down and is working well.
As I stated, there are an additional 50,000 workers in part-time arrangements who use the short-term social welfare code. Other jurisdictions have taken measures because they do not have the type of flexible arrangements in their social welfare codes as we have here, particularly with regard to short-time working. The support we provide in our code for those who are out of work for two or three days per week is not necessarily available in other jurisdictions where some short-term help has been provided, for example, to water workers in some continental jurisdictions. These countries do not have the ability to use income support measures under the social welfare code as a means of compensating people for the loss of productivity and, ultimately, for the wages and remuneration they would have received had they remained in full-time employment.
While I recognise this is a start, it is a belated start. Will the Taoiseach confirm that 98.5% of the workforce is excluded from the Government's proposal to provide €250 million to protect 30,000 jobs? I agree this is a frustrating time for employers who find themselves in a position in which employees must be let go. If employees are let go and a company goes out of business, it is difficult to get the firm up and running again. Job retention should be as much a primary focus for the Government as job creation.
Will the Taoiseach provide a few practical examples of how the proposed initiative will work and indicate when it will start? An employer in Clara, Portlaoise or Tullamore with ten employees is not bringing in money because the economy has declined. He or she is unable to pay service providers because he or she does not have an income flow and he or she is strapped by the bank because he or she cannot obtain overdraft facilities which are probably being cut back. The employer will either have to ask for further wage cuts, introduce a three-day week or let staff go. How and when can an employer in the Taoiseach's home town or any other town apply for a subsidy under the Government's scheme to retain employees?
Arising from this, the Fine Gael Party has argued that it is wrong in a country of this size to have 400,000 people on the live register. The Taoiseach will be as aware as I am of the frustration, difficulties and anger experienced by those who, through no fault of their own, find themselves out of a job, in receipt of unemployment benefit or assistance and unable to find work. Is it the Government's intention to transfer the social welfare payments such persons would receive once they have been assessed directly to employers as a subsidy to take on such persons in particular positions? Will the social welfare payment be transferred to applicant X who is being let go or is out of a job? Is the scheme confined to only 30,000 employees in particular sectors?
In any employment strategy the most important means by which we can maintain and create jobs in this time or any other time is to be a very competitive economy, acknowledge the changes that have taken place in the internationally traded environment and ensure we can provide quality goods and services at a competitive price to meet demand, albeit depleted demand in the context of the current global recession. Without sustainable public finances, to which we are committed, we cannot arrange for economic recovery. Without competitiveness in the economy, we cannot maintain 1.8 million people in work. We have lost the guts of 190,000 jobs in the past 12 months in terms of people coming on to the register. This is an indication of the seismic impact in real economic terms of the worldwide recession on Ireland as a small open economy.
The Deputy asked what short-term measures we can take. Obviously, we must take short-term measures which do not distort the existing market. We must ensure that a person in a traded sector that is not internationally traded does not get a subsidy at the expense of a person in another town down the road. He is telling me this is a distortion that does not benefit anybody.
The purpose of EU temporary aid schemes which allow for state aid in this area is to support viable businesses. It is important therefore, that criteria are met regarding viable but vulnerable enterprises and jobs that would otherwise go. The template in terms of the stabilisation fund is working well for people in the export business. It is true that the scheme does not apply in respect of domestic retailers because it aims to protect companies in the traded sector which are competing internationally and are doing what they can to maintain market share. That is the best means of ensuring value for taxpayers' money and complying with EU state aid rules, which set a limit of €500,000 per company. It is important that we work within the parameters.
While it is true that the measures are short-term, they are necessary. They work along similar lines to the stabilisation fund in terms of selecting vulnerable companies which will be able to survive the recession with some assistance and which are themselves doing all they can. We are not necessarily working from a blank sheet, therefore. Companies which are in that position will be able to apply for the new measures.
In regard to the financial mechanism by which they work, the intention for the remainder of this year is to use the moneys which are not at present used in the training fund for the purpose of financing the scheme. When we come to the end of the financial year, the training fund will be replenished by the moneys saved from the social welfare budget. If one takes X euro, the money is replenished at the end of the year and an Estimate provision is made next year. The question is how to transform passive income support in social welfare into an active employment subsidy payment in a way which avoids additionality of income because at the end of the day one cannot play with the same money twice.
I will try to be positive. The Taoiseach is as aware as I am of the critical nature of the unemployment situation. In the case of fiscal regimes which are not working because of the depressed state of the economy, is the Government considering an economic stimulus that would create jobs? When the rate of capital gains tax was set at 40%, things slowed down to a minimum but when the rate was reduced by the then Minister for Finance, Charlie McCreevy, things began to move rapidly again. The housing sector is practically at a standstill but reducing stamp duty to 2% for second-hand houses would give a stimulus to couples who are working and who might want to purchase. Neither of the two rates of VAT is operating at a level which the Taoiseach or anyone else would like. Does he see a potential, even over the short term, for reducing the lower level of VAT, in particular, to 10%? This would provide a stimulus to the hospitality sector, the tourism industry and smaller construction activities. Most Irish employers who employ small numbers of people would be able to get moving again because there would be an injection of confidence.
In respect of employers who want to take on new staff, how does he react to the Fine Gael proposal to abolish PRSI where young employees are hired for a period of two years? This would avoid the situation whereby young people who are emerging onto the market are forced to apply for unemployment assistance and thereby fall into a rut at a very early stage.
Last weekend, I read the comments by the chief executive officers of most of the bigger firms in the country, particularly in the communications, digital information and IT sector. All of them, without exception, said that if the country does not deal with digital information and broadband, we are kidding ourselves. We have been messing around with this for the past 15 years. In fairness, back in the early 1980s Ireland was in the top five European countries for communications capacity, but we have slipped seriously since then. Those CEOs say that if one wants the best schools and scholars and wants young people to be able to measure up to the competitiveness of their peers around the world in the next ten, 15 or 20 years, one must get the lead out, invest and do the job. The Taoiseach and I know that we have not done that job and, given the way we are heading, we will not be able to compete.
There is massive potential for job creation in this regard as well as the capacity it would give Ireland to compete internationally in future. Is the Government looking at this from the perspective of shifting priorities within its public capital programme and setting a timescale for implementing this work? Under the Coveney document, Fine Gael proposes a commercially-driven company to provide broadband and digital information capacity all over the country with a specific timeline and investment. It would be funded in part from the National Pensions Reserve Fund and from the European Investment Fund. Will the Government recognise the scale of the problem and get down to doing what is necessary? There is room for that kind of initiative, but courage is required to do it. The future lies in that area and if we do not deal with it, we will only be leaving ourselves further isolated from our counterparts both in Europe and beyond.
As regards the suggestion of a buoyancy effect in the midst of a deep recession, the reduction of VAT in the neighbouring jurisdiction, for example, has not had the buoyancy effect because demand is the problem. In addressing the public finance position, we must protect our taxation base. In fact, all the advice for the coming months concerns the need to broaden the tax base, rather than narrowing it. As regards stamp duty, we are seeing real reductions in the price of housing, which is determining a small pick-up in terms of sales over the past month or so. One would have to be tentative in making any comment about that, however. We are not suggesting that we are seeing a resurgence in house purchases. However, the idea that a reduction in stamp duty would provide a return to normality is not borne out by the objective facts. In my time as Minister for Finance, I adjusted to a more helpful way of dealing with stamp duty issues for first-time buyers of second-hand homes. First-time buyers of new homes are exempt anyway.
It is important to protect one's tax base in the context of having lost almost 30% of that base in the last two financial years. People will have to consider that fact carefully. That is borne out by the fact that, as regards Exchequer returns thus far, there has broadly been a maintenance of the projection profiled in respect of tax take, albeit a take that is far lower than previous years, including last year. Going from budget to budget, rather than introducing different fiscal responses during the course of a financial year, provides us with that prospect of stability on the tax run, albeit at a reduced rate of take than was the case in the past for a range of reasons, including the level of economic activity which determines the whole matter in any event.
Specific questions on broadband can be tabled to the Minister. Much more progress is being made in that area than is being given credit for. There are certain market issues that must be addressed in the context of the provision of these services. However, I cannot give a further response to the Deputy's question on the issue at the moment.
The Taoiseach may answer the next question about the direct transfer of subsidies for persons who are unemployed. Does he see the Government dealing with the question of transferring the social welfare of persons who are unemployed and looking for work to their employers?
We are open to implementing schemes and using the social partnership process as a monitor in any way that will convert passive income support into support for job retention and employment. The fundamental context in which all that must happen is to improve the competitiveness of the economy, something that is being done in many ways. However, in respect of short-term measures, the initial amount of €250 million is not a cap. It is about evolving policies and continuing discussions in terms of employee focused help on short-term social welfare provision, as well as helping companies that have been identified as being able to take up employment subsidies under this scheme and maintain jobs that would otherwise be lost. It is a question of devising the schemes to avoid the effect of displacement and distortion. One must be fair and reasonable to everybody in the system.
The Taoiseach's letter to the Irish Congress of Trade Unions was in response to its proposals on job creation and a protection plan. ICTU has indicated that his letter was too vague. Can he be specific on what ICTU claims is the need to ensure the social welfare system supports alternatives to redundancy? Will he support ending the requirement that workers must be fully unemployed before receiving welfare, as this clearly removes any possibility of training? Will he support basing the social welfare payment on lost earnings, rather than on the number of days lost? Where workers are in receipt of family income supplement, will the Government allow the retention of this much needed payment where the hours worked are fewer than 19 per week? What about the potential to modify the mortgage interest supplement and other secondary benefits? The rules pertaining to both of these should support alternatives to redundancy.
ICTU and a number of other concerned bodies have put forward proposals on the economy. Our party put forward 80 proposals on getting Ireland back to work through job creation, job retention, creating sustainability and helping people to avoid joining the ever lengthening dole queues. While I welcome the indication of the establishment of a scheme to subsidise workers in viable businesses struggling to survive in the current recession — a proposal we had put forward — we need to see greater monetary support for such a proposition. How quickly will the Taoiseach be in a position to outline the modalities of its introduction? How will it work? How will people access it? How does the Government intend to bring into effect this proposal?
There has been a great effort made by ICTU and many others in submitting proposals, including our own submission before the emergency budget in April. The Government has not yet presented a distinct set of intentions — we can only propose, it makes the decisions — regarding job retention and job creation. I purposely put job retention first with the impending loss of a further 320 jobs in Bus Éireann. That is just one example. What is the Taoiseach going to do in regard to that vital public service as an indictor of his real intent to save jobs and sustain public services?
I cannot answer every specific question. In regard to Bus Éireann, with a drop in passenger numbers and activity, that reflects back in terms of what the company can do to retain jobs and to maintain that position against a background of reduced revenues and passenger numbers. Unfortunately, it is one of the difficulties that company faces in having to manage its affairs.
There is an ongoing question on specific job initiatives but the need to avoid a distortionary effect, to find consistency of approach and to avoid discrimination against one set of workers as against another in terms of how one implements change is not a simple area. It is one in which much technical discussion is taking place under the aegis of social partnership in an effort to see what way we can design other measures, some of which have been proposed but about which there are some issues that we are trying to resolve in a way based on the fact that the taxpayer is borrowing €70 million per day just to keep current services going.
It is important we find a way forward which keeps the pitch level and provides the assistance which will be effective. While people can put forward any number of proposals, they must pass those tests and criteria of availability to all and sundry in an equitable and fair manner.
It is important at this stage of the discussions that the Government is in a position to indicate its intention in this area without closing off trying to make progress in other areas which remain under discussion. However, the discussions have not been completed yet because the problems which arise in regard to the applicability and application of some of these ideas need to be resolved in a way which does not discriminate.
The Taoiseach gave a commitment through prompt payments that the State would pay all moneys due to individuals and small businesses within 15 days. That has not been delivered on, especially in the case of the Department of Agriculture, Fisheries and Food which is taking months to process initial applications for the farm waste management grant. What is the timeline for delivering on prompt payments for small businesses and individuals?
Does the Government intend to review the tendering process because many small businesses do not have the opportunity to compete for public tenders due to the structures in place and the need for a significant amount of insurance and so on? Will the Government review that on the basis that it would make it more efficient for small businesses to compete and, as a result, reduce overall costs for the State?
The Deputy strayed beyond the ambit of the question but the Taoiseach may wish to be helpful.
In regard to the question on prompt payments, we are involved in ensuring payment to people due moneys from the State within 15 days. That decision was made only recently and it is being implemented. It will be applied across the board very shortly.
The Deputy mentioned the farm waste management grant, which is a different issue. The issue there is an over-subscription beyond the moneys earmarked under the rural development scheme, as generous as it was, and the ability to provide a solution to that problem in the context of the public finances over a two to three year period, which is what has been provided for. The Government must work in the context of contesting resources from all sectors of society.
I was referring to the first stage payment.
The Deputy can refer to any stage payment. It is based on the availability of resources and trying to ensure we pay, as best we can, for the over-subscription involved.
The Taoiseach needs to be better briefed than that.
That is the way it is with the rural development programme and the oversubscription of that scheme.
